## _cr0506

## Source details

**Canonical URL:** [_cr0506](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr0506.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr0506.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr0506.pdf.json)

---

### Sources and Uses of Energy Resources, 2003
- Background
  - Energy sector in 2003:
    - accounted for nearly 40 percent of GDP,
    - accounted for 83 percent of exports of goods,
    - accounted for 41 percent of central government revenues,
    - contributed about 3 percent to employment.
  - Natural gas production increased from 346 million cubic feet per day (mmcf/d) in 1975 to 2,594 mmcf/d in 2003.
  - The Atlantic Liquefied Natural Gas Company (ALNG) began operations in 1999; petrochemical and LNG production are mainly for exports.
- Structure of the sector
  - Proven oil and gas reserves: around 4,500 million barrels of oil equivalent; gas accounts for more than 80 percent. Including probable and possible reserves raises total to almost 9,000 million barrels.
  - 2003 production:
    - oil production: approximately 134,000 barrels of oil per day (bopd),
    - gas production: 500,000 boe of gas per day,
    - reserves-to-production ratios imply energy resources could last for almost 40 years.
  - Major state-owned companies: Petroleum Company of Trinidad and Tobago (PETROTRIN), Natural Gas Company (NGC), National Petroleum Marketing Company (NPMC).
  - Company market shares and roles:
    - BP and PETROTRIN are main crude oil producers, accounting for 45 percent and 50 percent of total respectively (BP is the only exporter of crude oil; PETROTRIN has refining capacity of 175,000 bopd).
    - BP is the major natural gas producer, accounting for 70 percent of total gas output; British Gas ~23 percent and four smaller companies ~7 percent.
    - Approximately 60 percent of gas produced is exported directly as LNG; three LNG plants in operation—ALNG Train I, ALNG Train II, and ALNG Train III.
    - Remaining 40 percent of gas is used by NGC for domestic industrial use (Point Lisas Industrial Estate); petrochemical output includes methanol, ammonia, and urea.
- Growth prospects
  - ALNG Train IV under construction, expected completion by end-2005/early 2006 with annual production capacity of 5.2 million metric tons of LNG (45 million boe).
  - BHP Billiton discovery (2001) has potential to produce up to one billion barrel of oil and about 2.5 trillion cubic feet of natural gas (450 million boe); production scheduled to begin in December 2004.
  - Mid-2004 additions: an ammonia plant and a mega-methanol plant began operations; an additional methanol plant expected late 2004/early 2005.
- Economic and fiscal contribution
  - Direct employment in the energy sector is less than 4 percent.
  - Contribution to real GDP growth reached 80 percent in 2003 as LNG Trains II and III came on stream.
  - Share of the energy sector in total GDP rose to above 40 percent in 2003.
  - FY 2002/03: energy-based revenues constituted slightly more than 40 percent of total budgetary revenue.
  - Relative tax burden of the energy sector rose from 64 percent in 1998 to 76 percent in 2003.
  - More than 50 percent of energy-based revenue comes from petroleum profit tax and supplemental petroleum tax.
  - Oil tax regime components:
    - royalties: 10 percent on onshore oil sales, 12.5 percent on offshore sales,
    - petroleum production levy: maximum rate of 3 percent,
    - small petroleum impost for Ministry of Energy administrative expenses,
    - petroleum profit tax: 50 percent on profits from oil production,
    - unemployment tax: 5 percent on profits from oil production (not deductible against profits tax),
    - supplemental petroleum tax: sliding rate depending on price, license timing, and production start.
  - Gas tax regime: royalties negotiated; corporate income tax at standard rate of 35 percent on profits; petroleum impost also applies.
  - About 70 percent of gas production subject to a specific royalty of TT$0.015 per mcf if used domestically and TT$0.02 per mcf if exported; in ad valorem terms the royalty is less than 0.3 percent of the value of natural gas.
- Balance of payments and FDI
  - Current account surplus rose by about 12 percentage points of GDP in 2003 to 13 percent of GDP.
  - Share of energy sector exports in total merchandise exports rose from an average of 78 percent in 2000–02 to 83 percent in 2003.
  - Investment income payments abroad by the energy sector averaged 5 percent of GDP in 2001–02 and declined to 3 percent of GDP in 2003.
  - Export markets in 2003:
    - United States accounted for 100 percent of crude oil exports and 86 percent of LNG exports.
  - Cumulative foreign direct investment in the energy sector over the last five years was about US$4 billion, nearly 50 percent of the country’s average GDP over the same period.
  - Domestic banks’ exposure to the energy sector is limited—less than 10 percent of domestic banks’ outstanding loans are directed to the energy sector.
- Key statistics (selected figures)
  - Natural gas production (2003): 2,594 million cubic feet per day.
  - Oil production (2003): 134,000 barrels of oil per day.
  - Extracted crude oil (2003): 49 million barrels; refined petroleum 54.1 million barrels; imported crude oil 33.1 million barrels; crude oil export 26 million barrels; domestic sales 15.1 million barrels.
  - Table 1 series highlights (1999–2003):
    - Share of employment: 3.1, 3.2, 3.0, 3.3, 3.3 (In percent).
    - Share of GDP—Energy sector: 29.2, 42.5, 37.9, 33.4, 41.5 (In percent).
    - Share of government revenues—Energy sector: 16.1, 30.2, 36.6, 31.1, 41.1 (In percent).
    - Crude oil and condensate production, in million of barrels: 45.7, 43.7, 41.5, 47.8, 49.1.
    - Natural gas liquids production, in million of barrels of oil equivalent: 5.7, 7.0, 7.5, 8.6, 10.1.
  - Table 4 (energy related exports, 1999–2004, in US$ millions): 1,999; 3,483; 3,365; 2,976; 4,376; 5,352.
  - Current account (percent of GDP, 1999–2004): 0.4; 6.6; 5.0; 0.9; 12.8; 7.3.
  - Energy related current account contribution (percent of GDP, 1999–2004): 12.4; 19.7; 14.5; 9.9; 18.5; 19.2.
  - Energy related financial account (percent of GDP, 1999–2004): 6.8; 7.5; 9.2; 8.3; 11.2; 14.1.
  - Foreign direct investment (inward, US$ millions, 1999–2004): 468; 614; 816; 738; 1,182; 1,774.

### Employment Trends
- Aggregate labor market outcomes
  - Trinidad and Tobago experienced 10 consecutive years of solid economic growth, driven mainly by the energy sector.
  - Unemployment rate:
    - Fell from 18.4 percent in 1994 to 10.5 percent in 2003.
    - Has hovered around 10 percent over the last three years.
  - Participation rate has been increasing; the female labor force and female employment growth exceeded males in all but two years in the period under review.
  - Minimum wage:
    - Introduced at TT$7 per hour in 1998 and increased to TT$8 in 2001.
    - Employment generation reached a peak (at 19,500 jobs) following the introduction of the minimum wage.
- Time-series highlights (selected 1994–2003 figures)
  - Energy growth (1994–2003): 8.2; 0.1; 1.8; -2.0; 5.4; 8.1; 12.4; 5.6; 13.5; 31.2.
  - Nonenergy growth (1994–2003): 3.9; 4.2; 3.2; 4.2; 4.4; 5.1; 4.9; 3.7; 3.5; 3.5.
  - Employment (thousands, 1994–2003): 415.6; 431.5; 444.2; 459.8; 479.3; 489.4; 503.4; 514.1; 525.1; 534.2.
  - Standard Definition unemployment (1994–2003): 13.1; 12.0; 11.3; 10.5; 9.9; 9.4; 8.5; 7.5; 7.3; 7.4.
  - Extended Definition unemployment (1994–2003): 18.4; 17.2; 16.2; 15.0; 14.2; 13.1; 12.1; 10.8; 10.4; 10.5.
- Program and sectoral adjustments
  - CEPEP launched in October 2002:
    - First phase employed 4,900 persons in 110 companies.
    - Latest data indicate employment by the program increased by 1,100.
    - The increase of 5,200 in 2003 in the number of jobs created in the community, social, and personal services category was the largest in the past 11 years.
  - Closure of CARONI in 2003:
    - 9,000 workers accepted the voluntary separation package.
    - Employment in the sugar sector fell by 8,800 between the second and third quarters of 2003, while the total number of unemployed persons rose by only 3,700.
- Wages and skills
  - Wages primarily determined by collective bargaining.
  - Table 2 highlights (selected years, In percent):
    - Entry Wages (1994–2002): 0.5; 1.9; 2.9; 1.9; 2.4; 1.7; 2.4; 1.5; ... (2002 entry wage not reported).
    - Industrial Wages (1994–2002): 5.1; 4.1; 8.5; 4.6; 5.1; ...; 9.0; 9.3; 11.6.
    - Average Wage Increases1/ (1994–2002): 1.4; 2.7; 6.5; -3.7; 3.2; 10.0; -2.4; 10.0; 9.4.
    - Inflation (1994–2002): 8.8; 5.3; 3.3; 3.6; 5.6; 3.4; 3.5; 5.6; 4.2.
    - 1/ Excludes the energy sector.
  - Observations:
    - Entry wages have lagged behind inflation.
    - Industrial wages have generally increased in real terms and have grown particularly rapidly in the past three years.
    - A 15 percent award to public servants for a three-year period in 2003 served as a benchmark for wage negotiations in other sectors.
    - Approximately 45 percent of the workforce has either elementary or secondary education.
- Structural issues and policy focus
  - Unemployment is structural: skills mismatches, capital-intensity of the energy sector, and wage pressures associated with large energy-related revenue inflows.
  - Government initiatives include increased expenditure on education and training and the new University of Trinidad and Tobago.
  - Policy emphasis on competitiveness-enhancing reforms in labor-intensive sectors and reforms to enhance labor market flexibility.

### External Competitiveness
- Context and sectoral employment
  - 87 percent of the total labor force work in the non-energy sector, 3 percent in the energy sector, and the remaining 10 percent are unemployed.
  - Despite energy-sector growth, non-energy production and export growth have been sluggish.
- Exchange rate and REER
  - TT$ has remained broadly stable vis-à-vis the U.S. dollar; de facto peg at around 6.3 TT$ per US$ since 1997.
  - IMF and authorities’ CPI-based REERs remain some 12 and 16 percent above the 1997 level, respectively.
  - Of the 12 percent REER appreciation since 1997, 7 percentage points attributable to U.S. dollar appreciation against major trading partners’ currencies, and 5 percent to higher domestic inflation.
- Equilibrium REER (EREER)
  - Econometric model (Johanson procedure) based on quarterly data 1990–2003 suggests EREER has been steadily appreciating and REER is still below its long-term equilibrium rate (currency remains undervalued).
  - Reported (as in source): INTERESTOILPRODEREER*57.1*43.1*96.0++=
- Unit labor cost and production costs
  - ULC in manufacturing (relative to the United States) have fallen markedly, reflecting productivity increases despite notable wage increases.
  - Producer prices for basic commodities indicate overall production costs increased; food, beverage, and wood industries production costs increased substantially during 1996–2003.
- Export performance
  - Non-energy exports dropped in 2003 by some 8 percent across all categories.
  - Manufactured goods (excluding steel) declined by a cumulative 25 percent since 2001.
  - Growth in services exports during 1996–2002 was disappointing and was negative by some 3 percent in 2003.
  - Energy exports increased by some 45 percent in 2003 and are projected to increase by a further 35 percent in 2004.
- Competitiveness indices and rankings
  - Global Competitiveness Report 2003 ranks Trinidad and Tobago as an average performer; overall ranking 47.
  - Main export markets for non-energy products: CARICOM countries 70 percent; United States 26 percent; United Kingdom 4 percent.
- Policy options and fiscal role
  - Pass-through estimates:
    - Pass-through coefficient estimated at some 60 percent.
    - Statistical pass-through during the 1993 exchange rate adjustment was 50 percent after 6 months.
    - Estimating pass-through for 1994–2003 suggests a cumulative pass-through of some 55 percent after three months.
  - Fiscal importance of energy revenues:
    - Energy revenues in FY2002/03 amounted to 41 percent of total government revenues or 11 percent of GDP.
    - In FY2001/02 energy revenues were 7 percent of GDP and 31 percent of government revenues.
  - Historical fiscal behavior:
    - Fiscal policy has been procyclical over the last decade; correlation coefficient between expenditures and revenues: 0.82 for the decade; since 1999 correlation coefficient of 0.93.
    - Volatility: energy revenues standard deviation of 2.7 translated into expenditure volatility with standard deviation of 2.2.
  - Revenue Stabilization Fund (RSF) rules:
    - Deposits/withdrawals triggered when quarterly energy tax revenues and royalties exceed or fall below quarterly budgeted revenues by 10 percent or more.
    - Deposits should be at least 67 percent of the difference between realized and budgeted revenues.
    - Withdrawals equal to the lesser of (i) the petroleum taxation deviation for the quarter/year; and (ii) 25 percent of the balance of the RSF at the beginning of the quarter/year.
  - Recommendation: Appropriate fiscal rules and a well designed revenue stabilization fund to minimize Dutch disease effects and smooth volatility.
- Structural policies (recent initiatives)
  - Public enterprise reform: sugar company restructured in 2003.
  - Financial intermediation: CBTT reduced reserve requirements by 4 percentage points in September 2003 (to 14 percent) with a schedule to 9 percent by mid-2005; first reduction resulted in a decline of lending rates by 200 basis points.
  - Telecommunications: new Telecommunication Services Authority and market liberalization.
  - Transportation: Port Authority restructuring plans for majority private participation in cargo handling.
  - Education: new university established and increased expenditure on education and training.
- Conclusion on competitiveness
  - External competitiveness in the non-energy sector has deteriorated; REER analysis suggests it has remained in line with fundamentals, unit labor costs have been declining relative to the United States, but declining non-energy exports, high capital costs, and wage pressures adversely affect competitiveness.
  - Policy implication: determined pursuit of structural reforms, especially in the labor market, to promote employment and non-energy sector growth.

### Monetary and Exchange Rate Policy — Institutional Framework and Evolution
- Institutional background and objectives
  - Primary objective: achieve a low and stable rate of inflation and maintain suitable liquidity to encourage economic activity without promoting inflationary pressures.
  - Stable foreign exchange market critical given government is major earner of foreign exchange.
  - Financial system composition: commercial banks hold just under half of total assets; six commercial banks (two foreign subsidiaries and four majority or fully locally-owned).
  - Foreign exchange market features: small number of major foreign exchange suppliers (energy sector earnings); Central Bank (CBTT) an important supplier of foreign exchange.
- Historical exchange regime and market arrangements
  - Exchange controls abolished in April 1993; TT$ allowed to float; since 1997 de facto peg at about TT$6.3 per U.S. dollar.
  - Special arrangements: Agreed Minute on market operations, Code of Conduct for market participants, Sharing Arrangement to share foreign exchange purchases equally among dealers.
  - CBTT’s sales of foreign exchange are based on ratios, ranging from 1 to 28 percent; tacit agreement among market participants to keep exchange rate within a notional band.
- New monetary framework (May 2002) and operational details
  - CBTT introduced repo rate to signal monetary policy stance; initial repo rate set at 5.75 percent in May 2002.
  - Monthly announcement: CBTT announces repo rate on the first Thursday of each month.
  - Rates tied to repo:
    - Reverse repo rate: repo rate less 50 basis points.
    - Discount rate: repo rate plus 200 basis points.
    - Special deposit rate: repo rate less 200 basis points.
  - Policy band: repo and reverse repo define trading band; discount and special deposit rates provide ceiling and floor for overnight interbank rate.
  - CBTT sold almost TT$1.7 billion interest-bearing treasury notes over the 12-month period ending October 2002, reducing the Special Deposit Account.
  - OMOs conducted almost daily since that period.
- Reserve requirements, OMOs, and liquidity management
  - Reserve requirement changes:
    - October 2003: phased reduction announced from 18 percent to 9 percent by March 2005.
    - Implemented reductions: 18 percent to 14 percent in October 2003; lowered further to 11 percent in September 2004.
  - To offset monetary injection from CRR reductions, special issues of government bonds continue to be issued simultaneously to absorb released resources.
  - OMOs and short-term government securities sales influence short-term interest rates by changing banking system liquidity; foreign exchange intervention also used to reduce excess liquidity.
- Interest rate developments and transmission
  - Repo rate path:
    - 5.75 percent in May 2002,
    - reduced to 5.25 percent in September 2002 from 5.5 percent,
    - lowered to 5 percent in September 2003.
  - Short-term money market rates and commercial bank interest rates moved broadly in line with repo rate changes.
  - Discount and special deposit rate settings reinforce intraday policy range for the interbank overnight rate.
- Foreign exchange operations
  - Historical FX operations:
    - 1993–95: CBTT’s sales to market US$42 million; CBTT purchases from commercial banks US$150 million.
    - By end-1996 CBTT sold US$102 million to the market.
  - Recent FX sales:
    - 2002: CBTT sold US$309 million to the market.
    - 2003: CBTT sold almost US$500 million to the market.
- Outcomes and market development
  - Credit and growth: repo reductions and CRR reductions contributed to a sharp increase in credit to the private sector of 19 percent for the 12-month period ending April 2004.
  - Inflation: retail price increases averaged about 4½ percent over the last 10 years; core inflation averaged some 1 percent a year.
  - Transparency: expanded monetary policy framework improved transparency and transmission; market recognizes repo rate as key indicator.
  - Market infrastructure:
    - July 2004: expanded auction system for government securities and primary dealer arrangement expanded to include eligible nonbank financial institutions.
    - Expanded auction system incorporated noncompetitive bids of up to TT$20,000 to encourage small investor participation.
    - Move toward harmonization of reserve requirements across financial institutions to support monetary policy objectives.
- Policy implications and institutional adjustments
  - Authorities to continue simultaneous issuance of government bonds to absorb resources released by lower reserve requirements.
  - Developmental measures: expanded auction system, broader primary dealer participation, harmonization of reserve requirements to enhance monetary policy efficacy.

*Italic: Source: _cr0506 (PDF chapter/section).*

### 2.     Sources and Uses of Energy Resources, 2003 .........................................................6

### Sources and Uses of Energy Resources, 2003

### Background
- Trinidad and Tobago has a long history of oil exploration and production dating to the first geological survey in 1855; first shipment of oil occurred in 1910 and the first refinery was established in 1917.
- In 2003, the energy sector:
  - accounted for nearly 40 percent of GDP,
  - accounted for 83 percent of exports of goods,
  - accounted for 41 percent of central government revenues,
  - contributed about 3 percent to employment (Table 1).
- Natural gas production increased from 346 million cubic feet per day (mmcf/d) in 1975 to 2,594 mmcf/d in 2003.
- The Atlantic Liquefied Natural Gas Company (ALNG) began operations in 1999, boosting the gas sector; petrochemical and LNG production are mainly for exports.

### Structure of the Sector
- Proven oil and gas reserves: around 4,500 million barrels of oil equivalent; gas accounts for more than 80 percent. Including probable and possible reserves raises total to almost 9,000 million barrels.
- In 2003:
  - oil production was approximately 134,000 barrels of oil per day (bopd),
  - gas production was 500,000 boe of gas per day,
  - reserves-to-production ratios imply energy resources could last for almost 40 years.
- Major state-owned companies: Petroleum Company of Trinidad and Tobago (PETROTRIN), Natural Gas Company (NGC), National Petroleum Marketing Company (NPMC).
- Company market shares and roles (Table 2 and Figure 2):
  - BP and PETROTRIN are main crude oil producers, accounting for 45 percent and 50 percent of total respectively (BP is the only exporter of crude oil; PETROTRIN has refining capacity of 175,000 bopd).
  - BP is the major natural gas producer, accounting for 70 percent of total gas output; British Gas ~23 percent and four smaller companies ~7 percent.
  - Approximately 60 percent of gas produced is exported directly as LNG; three LNG plants in operation—ALNG Train I, ALNG Train II, and ALNG Train III.
  - Remaining 40 percent of gas is used by NGC for domestic industrial use (Point Lisas Industrial Estate); petrochemical output includes methanol, ammonia, and urea.

### Growth Prospects
- Significant further expansion is expected due to LNG expansion, newly discovered fields, and downstream petrochemicals:
  - ALNG Train IV under construction, expected completion by end-2005/early 2006 with annual production capacity of 5.2 million metric tons of LNG (45 million boe).
  - BHP Billiton discovery (2001) on the northeastern coast has potential to produce up to one billion barrel of oil and about 2.5 trillion cubic feet of natural gas (450 million boe); production scheduled to begin in December 2004.
  - Mid-2004 additions: an ammonia plant and a mega-methanol plant began operations; an additional methanol plant expected late 2004/early 2005.

### Economic and Fiscal Contribution
- Direct employment in the energy sector is less than 4 percent due to capital intensity, but:
  - contribution to real GDP growth reached 80 percent in 2003 as LNG Trains II and III came on stream,
  - share of the energy sector in total GDP rose to above 40 percent in 2003.
- Production-sharing agreements dominate new oil and gas contracts; government receives cash payments rather than taking physical resource; no royalties apply to these production-sharing contracts.
- FY 2002/03: energy-based revenues constituted slightly more than 40 percent of total budgetary revenue (Table 3).
- Relative tax burden of the energy sector rose from 64 percent in 1998 to 76 percent in 2003.
- More than 50 percent of energy-based revenue comes from petroleum profit tax and supplemental petroleum tax.
- Gas and petrochemical subsectors have low current revenue contribution due to tax holidays and capital cost offsets; tax contributions expected to increase as holidays expire and capital costs recover.
- Oil tax regime components:
  - royalties: 10 percent on onshore oil sales, 12.5 percent on offshore sales,
  - petroleum production levy: maximum rate of 3 percent,
  - small petroleum impost for Ministry of Energy administrative expenses,
  - petroleum profit tax: 50 percent on profits from oil production,
  - unemployment tax: 5 percent on profits from oil production (not deductible against profits tax),
  - supplemental petroleum tax: sliding rate depending on price, license timing, and production start.
- Gas tax regime: royalties negotiated; corporate income tax at standard rate of 35 percent on profits; petroleum impost also applies.
- Gas royalty specifics and fiscal constraints:
  - about 70 percent of gas production subject to a specific royalty of TT$0.015 per mcf if used domestically and TT$0.02 per mcf if exported,
  - in ad valorem terms the royalty is less than 0.3 percent of the value of natural gas,
  - options to increase gas royalty are limited by license agreements and long-term pass-through arrangements to NGC, which could indirectly lower government revenue.

### Contribution to the Balance of Payments
- Energy sector performance is the main determinant of the external current account balance:
  - current account surplus rose by about 12 percentage points of GDP in 2003 to 13 percent of GDP, driven by high oil and gas prices and increased gas export volumes.
  - share of energy sector exports in total merchandise exports rose from an average of 78 percent in 2000–02 to 83 percent in 2003.
  - investment income payments abroad by the energy sector averaged 5 percent of GDP in 2001–02 and declined to 3 percent of GDP in 2003 due to increased reinvestment.
- Export markets in 2003:
  - United States accounted for 100 percent of crude oil exports and 86 percent of LNG exports.
  - Other markets include Spain, Japan, and Caribbean countries.
- Capital account and FDI:
  - cumulative foreign direct investment in the energy sector over the last five years was about US$4 billion, nearly 50 percent of the country’s average GDP over the same period,
  - energy sector financed mainly through foreign direct investment; domestic banks’ exposure to the energy sector is limited—less than 10 percent of domestic banks’ outstanding loans are directed to the energy sector.

### Key Statistics (selected figures from Tables)
- Natural gas production (2003): 2,594 million cubic feet per day.
- Oil production (2003): 134,000 barrels of oil per day.
- Extracted crude oil (2003 figure shown in Figure 2): 49 million barrels; refined petroleum 54.1 million barrels; imported crude oil 33.1 million barrels; crude oil export 26 million barrels; domestic sales 15.1 million barrels.
- Table 1 highlights (1999–2003 series; selected entries):
  - Share of employment (1999–2003): 3.1, 3.2, 3.0, 3.3, 3.3 (In percent).
  - Share of GDP—Energy sector (1999–2003): 29.2, 42.5, 37.9, 33.4, 41.5 (In percent).
  - Share of government revenues—Energy sector (1999–2003): 16.1, 30.2, 36.6, 31.1, 41.1 (In percent).
  - Crude oil and condensate production, in million of barrels (1999–2003): 45.7, 43.7, 41.5, 47.8, 49.1.
  - Natural gas liquids production, in million of barrels of oil equivalent (1999–2003): 5.7, 7.0, 7.5, 8.6, 10.1.
- Table 4 (selected external flows, 1999–2004 projections, in millions of U.S. dollars and percent of GDP):
  - Energy related exports (1999–2004, in US$ millions): 1,999; 3,483; 3,365; 2,976; 4,376; 5,352.
  - Current account (percent of GDP): 0.4; 6.6; 5.0; 0.9; 12.8; 7.3.
  - Energy related current account contribution (percent of GDP): 12.4; 19.7; 14.5; 9.9; 18.5; 19.2.
  - Energy related financial account (percent of GDP): 6.8; 7.5; 9.2; 8.3; 11.2; 14.1.
  - Foreign direct investment (inward, US$ millions): 468; 614; 816; 738; 1,182; 1,774.

*Source: _cr0506 - 2.     Sources and Uses of Energy Resources, 2003*

### 14.      Trinidad and Tobago has experienced 10 consecutive years of solid economic

### _cr0506 - 14.      Trinidad and Tobago has experienced 10 consecutive years of solid economic

### Employment Trends (A)
- Trinidad and Tobago experienced 10 consecutive years of solid economic growth, driven mainly by the energy sector.
- Unemployment rate:
  - Fell from a high of 18.4 percent in 1994 to 10.5 percent in 2003.
  - Has hovered around 10 percent over the last three years.
- Participation rate:
  - Defined as the ratio of the labor force to the non-institutional population (NIP).
  - The NIP is the working age population, that is, those persons who are over the age of 15 and under the age of normal retirement.
  - In recent years the participation rate has been increasing (greater percentage of the NIP participating in the workforce).
  - Movements reflect cyclical “encouraged worker” effects and structural influences (changing age structure, increased female participation).
  - The rate of growth in both the female labor force and female employment has exceeded that of males in all but two years in the period under review.
- Minimum wage:
  - Introduced at TT$7 per hour in 1998 and increased to TT$8 in 2001.
  - Directed mainly at providing a safety net for vulnerable workers in the services sector (domestic workers, store clerks, etc.).
  - Employment generation reached a peak (at 19,500 jobs) following the introduction of the minimum wage.
  - Because the minimum wage coincided with expansionary factors (construction phase of two ammonia plants and Atlantic LNG Train I), it is difficult to isolate its impact on employment.
- Table 1 highlights (selected figures from 1994–2003):
  - 1994: Energy growth 8.2; Nonenergy growth 3.9; Employment 415.6 (In thousands); Standard Definition unemployment 13.1; Extended Definition 1/ unemployment 18.4
  - 1995: Energy 0.1; Nonenergy 4.2; Employment 431.5; Standard 12.0; Extended 17.2
  - 1996: Energy 1.8; Nonenergy 3.2; Employment 444.2; Standard 11.3; Extended 16.2
  - 1997: Energy -2.0; Nonenergy 4.2; Employment 459.8; Standard 10.5; Extended 15.0
  - 1998: Energy 5.4; Nonenergy 4.4; Employment 479.3; Standard 9.9; Extended 14.2
  - 1999: Energy 8.1; Nonenergy 5.1; Employment 489.4; Standard 9.4; Extended 13.1
  - 2000: Energy 12.4; Nonenergy 4.9; Employment 503.4; Standard 8.5; Extended 12.1
  - 2001: Energy 5.6; Nonenergy 3.7; Employment 514.1; Standard 7.5; Extended 10.8
  - 2002: Energy 13.5; Nonenergy 3.5; Employment 525.1; Standard 7.3; Extended 10.4
  - 2003: Energy 31.2; Nonenergy 3.5; Employment 534.2; Standard 7.4; Extended 10.5
  - Source: Central Statistical Office.
  - 1/ Extended Definition: includes as unemployed persons who looked for work up to three months preceding the week of the survey.
- Impact of CEPEP:
  - Launched in October 2002.
  - First phase employed 4,900 persons in 110 companies.
  - Latest data indicate employment by the program increased by 1,100.
  - The increase of 5,200 in 2003 in the number of jobs created in the community, social, and personal services category was the largest in the past 11 years.
  - CEPEP contributed positively to employment generation especially among female, middle-aged workers with limited years of schooling.
- Closure of CARONI (sugar company) in 2003:
  - 9,000 workers accepted the voluntary separation package.
  - Outcomes for those workers:
    - Some re-absorbed into new entities (Sugar Manufacturing Company Limited and private operating companies).
    - More than 50 percent were over the age of 40 and some left the labor force.
    - Others obtained employment in other sectors.
  - Employment in the sugar sector fell by 8,800 between the second and third quarters of 2003, while the total number of unemployed persons rose by only 3,700 — indicating offsetting employment generation in other sectors.

### Wage Trends (B)
- Wages determined primarily by collective bargaining.
- Table 2 (selected figures, In percent):
  - Entry Wages, Industrial Wages, Average Wage Increases1/, Inflation:
    - 1994: 0.5; 5.1; 1.4; 8.8
    - 1995: 1.9; 4.1; 2.7; 5.3
    - 1996: 2.9; 8.5; 6.5; 3.3
    - 1997: 1.9; 4.6; -3.7; 3.6
    - 1998: 2.4; 5.1; 3.2; 5.6
    - 1999: 1.7; ...; 10.0; 3.4
    - 2000: 2.4; 9.0; -2.4; 3.5
    - 2001: 1.5; 9.3; 10.0; 5.6
    - 2002: ...; 11.6; 9.4; 4.2
  - Source: Central Statistical Office.
  - 1/ Excludes the energy sector.
- Observations:
  - Entry wages have lagged behind inflation.
  - Industrial wages have generally increased in real terms and have grown particularly rapidly in the past three years.
  - Average wage increases outside the energy sector have been rising.
  - A 15 percent award to public servants for a three-year period in 2003 served as a benchmark for wage negotiations in other sectors.
  - Demand outstripping supply in sectors such as finance and energy; reverse in industries using low/semi-skilled workers.
  - Approximately 45 percent of the workforce has either elementary or secondary education.
  - If wage increases continue without productivity gains, some sectors may lose competitiveness, adversely affecting future employment generation.

### Structural Issues (C)
- With unemployment around 10 percent, government efforts have focused on increasing expenditure on education and training to correct skilled labor deficiencies.
- Initiatives include the new University of Trinidad and Tobago and short/medium term programs to train youth in areas that may lead to sustainable employment.
- The unemployment problem is structural; given rising participation rates, significant near-term downward movement in unemployment should not be expected.

### Conclusion (D)
- High unemployment reflects both an increase in participation and structural constraints limiting job creation:
  - Skills mismatches in an increasingly knowledge-based growth model.
  - Capital-intensity of the energy sector.
  - Wage pressures associated with large energy-related revenue inflows.
- Positive developments in training and education have been largely offset by job losses in the sugar sector and possibly adverse impacts of the minimum wage.
- The structural nature of unemployment reinforces the need to focus on competitiveness-enhancing reforms in labor-intensive sectors and to design a reform agenda to enhance labor market flexibility.

### External Competitiveness (III)
- Context:
  - Competitiveness of the non-energy tradable sector is crucial because it is the main source of employment.
  - Eighty seven percent of the total labor force work in the non-energy sector, 3 percent in the energy sector, and the remaining 10 percent are unemployed.
  - Despite energy-sector growth, unemployment remains high and non-energy production and export growth have been sluggish.
  - Expected large energy revenue inflows ahead could intensify pressures on the real exchange rate.
- Competitiveness Indicators (A)
  - Exchange rate and REER:
    - The Trinidadian dollar has remained broadly stable vis-à-vis the U.S. dollar over the last decade.
    - After a significant devaluation in April 1993, the TT$ only depreciated by some 10 percent through 1997 in nominal terms, and has remained within a narrow band at around 6.3 TT$ per US$ since.
    - IMF and authorities’ CPI-based REERs remain some 12 and 16 percent above the 1997 level, respectively.
    - Of the 12 percent REER appreciation since 1997, 7 percentage points can be attributed to the appreciation in the U.S. dollar rate against Trinidad and Tobago’s major trading partners’ currencies, and 5 percent to the higher domestic inflation.
  - Equilibrium REER (EREER):
    - Real appreciation was accompanied by an upward shift in the equilibrium REER, reflecting strengthened fundamentals (e.g., increase in oil prices adding to country wealth).
    - An econometric model (following Edwards (1994)) was estimated; because variables are I(1), the Johanson procedure was used to estimate the long-run cointegrating relationship.
    - Reported (as in source): INTERESTOILPRODEREER*57.1*43.1*96.0++=
    - The data set covers the period 1990–2003 and is based on quarterly observations.
    - Simulation suggests the EREER has been steadily appreciating over the last decade, and that the REER is still below its long-term equilibrium rate (currency remains undervalued), pointing toward further pressures to appreciate.
- Unit labor cost (ULC):
  - ULC in manufacturing (relative to the United States) have fallen markedly over the last years despite notable wage increases, suggesting an improvement in competitiveness.
  - Decomposition indicates this largely reflects an increase in productivity, while real wages have increased at a faster rate than in the United States.
  - Caution: ULC does not account for unit capital costs or prices of intermediate and capital goods. Substitution from labor to capital can make labor competitiveness appear to increase even if overall competitiveness has not.
  - Given the capital-intensive oil and gas sectors and recent large capital investment, capital costs are expected to have increased.
  - Producer prices for basic commodities suggest overall production costs increased; for example, food, beverage, and wood industries production costs increased substantially during 1996–2003.
- Market share and exports:
  - Growth in non-energy commodity and service exports has been modest; exports declined in 2003.
  - Non-energy exports dropped in 2003 by some 8 percent, across all categories.
  - Manufactured goods (excluding steel) declined by a cumulative 25 percent since 2001.
  - Growth in exports of services during 1996–2002 was disappointing and was negative by some 3 percent in 2003.
  - Energy exports increased by some 45 percent in 2003 and are projected to increase by a further 35 percent in 2004.

*Prepared by Saqib Rizavi (WHD) and Stephanie Eble (WHD); source: Central Statistical Office and Trinidad and Tobago authorities.*

### 33.      Nevertheless, Trinidad

### _cr0506 - 33.      Nevertheless, Trinidad

### Export performance and market shares
- Trinidad and Tobago has maintained its market share in its main export markets, which have experienced strong import growth in tandem with their cyclical recovery.
- Main export markets for non-energy products:
  - CARICOM countries: 70 percent
  - United States: 26 percent
  - United Kingdom: 4 percent
- Trinidad and Tobago’s non-energy exports as share of non-energy imports of these countries has fluctuated around the same value over the last few years.

### Competitiveness index and rankings
- Summary statement:
  - The Global Competitiveness Report ranks Trinidad and Tobago as an average performer in 2003, and has recently downgraded it.
  - While Trinidad and Tobago has outperformed other countries in the CARICOM region or of the FTAA, its competitiveness ranking (47) is significantly lower than either of its major trading partners, the United States and the United Kingdom.
  - Trinidad and Tobago has fallen in ranking across all indicators over the last two years—partly as a result of the emergence of new growth economies—which points to the need to make continuous improvements in order not to fall behind vis-à-vis other countries.
- Extracts from Table 1 (preserve original presentation):
  - Growth competitiveness
    - Trinidad and Tobago474237
  - Components:
    - Macroeconomic environment444152
    - Public institution index524336
    - Technology index454325
  - Main trading partners
    - United States221
    - United Kingdom151111
  - Other countries in the region
    - Costa Rica494943
    - Dominican Republic585652
    - Jamaica635760
    - FTAA 2/565555
  - Business competitiveness
    - Trinidad and Tobago524431
  - Components:
    - Company operations and strategy544427
    - Business environment534438
  - Main trading partners
    - United States212
    - United Kingdom637
  - Other countries in the region
    - Costa Rica443948
    - Dominican Republic594160
    - Jamaica555939
    - FTAA 2/525657
- Source noted in original: World Economic Forum Competitiveness Indicators, 2003. (Ranking of 80 countries with 1 as the highest ranking. FTAA average ranking weighted by GDP.)

### Macroeconomic environment: advantages and disadvantages (Table 2 highlights)
- Disadvantages and (preserved) rankings/outcomes:
  - Real exchange rate92
  - Diversion of public funds72
  - Public trust of politicians69
  - Distortive government subsidies64
  - Interest rate spread62
  - Distortive government intervention46
- Advantages and (preserved) rankings/outcomes:
  - Recession expectations10
  - Access to credit19
  - Government surplus21
  - National savings rate22
  - Country credit rating42
- Note: On other indicators, Trinidad and Tobago performs highest in technology, reflecting the spillovers from the energy sector; however, overall ranking in technology is not very high, reflecting strong reliance on FDI, low enrolment in tertiary education, and low research and development activity.

### Policy options to enhance competitiveness — exchange-rate policy
- Key analytical points:
  - Effectiveness of a devaluation depends on exchange rate pass-through to domestic prices; long-lasting impact depends on pass-through.
  - Pass-through likely higher when:
    - larger share of imported goods in domestic consumption,
    - smaller size of the economy (price-taker),
    - lower level of competition in the domestic market.
  - If pass-through coefficient is very high, depreciation will not have much impact on competitiveness beyond the short term.
- Stylized facts for Trinidad and Tobago:
  - Small, open economy with ratio of imports and exports to GDP of 90 percent.
  - Imports to domestic consumption: 55 percent.
  - Strong labor unions unlikely to accept a sustained fall in real wages.
  - De facto peg at about TT$6.3 per U.S. dollar since 1997.
  - In 1998–2003, CPI inflation in Trinidad and Tobago was persistently above that in the United States, causing a real appreciation against the U.S. dollar of some 14 percent.
- Empirical pass-through estimates:
  - The pass-through coefficient is estimated at some 60 percent.
  - The statistical pass-through during the 1993 exchange rate adjustment was 50 percent after 6 months.
  - Estimating the pass-through for 1994–2003 suggests a cumulative pass-through of some 55 percent after three months.
  - (Note on estimation): The variables used are the exchange rate of the Trinidad and Tobago dollar to the U.S. dollar, domestic consumer prices, and the production index as a proxy for aggregate demand. The data are quarterly and the sample period covers 1994–2003. The results were not sensitive to the ordering of the variables.

### Fiscal policy: role and evidence
- Energy revenue importance and volatility:
  - Energy revenues in FY2002/03 amounted to 41 percent of total government revenues or 11 percent of GDP.
  - In FY2001/02 energy revenues were 7 percent of GDP and 31 percent of government revenues.
- Fiscal policy role:
  - Key role in controlling aggregate demand and managing volatile energy revenues through countercyclical fiscal policy (smoothing government spending on non-tradables).
- Historical behavior:
  - Over the last decade, fiscal policy in Trinidad and Tobago has been procyclical.
  - Correlation coefficient between expenditures and revenues: 0.82 for the decade; since 1999 correlation coefficient of 0.93.
  - Volatility: energy revenues standard deviation of 2.7 translated into expenditure volatility with standard deviation of 2.2.
- Revenue Stabilization Fund (RSF) design features and numerical rules:
  - Current rules stipulate deposits and withdrawals to the RSF are to be made when quarterly energy tax revenues and royalties exceed or fall below the quarterly revenues anticipated in the budget by 10 percent of more.
  - Deposits should be at least 67 percent of the difference between realized and budgeted revenues.
  - Withdrawals are to be equal to the lesser of:
    - (i) the petroleum taxation deviation for the quarter/year under reference; and
    - (ii) 25 percent of the balance of the RSF at the beginning of the quarter/year.
- Policy recommendation:
  - Appropriate fiscal rules and procedures supported by a well designed revenue stabilization fund could be key in minimizing Dutch disease effects.
  - Prudent fiscal management allowing for fiscal surpluses during times of large energy-related revenues is emphasized.
- Fiscal liquidity impact:
  - With over 30 percent of the budget financed from energy-related taxes, paid in foreign currency and sold to the CBTT, the non-energy fiscal deficit is a major source of liquidity in the banking system.
  - The cumulative fiscal injection from this deficit was usually around TT$500 million (2.7 percent of 1997 GDP) per annum.

### Structural policies (recent government initiatives)
- Public enterprise reform:
  - The loss-making sugar company was restructured in 2003 to improve its competitiveness.
  - Steps are being taken to strengthen governance and transparency in the other public enterprises.
- Financial intermediation:
  - The CBTT reduced reserve requirements by 4 percentage points in September 2003 (to 14 percent) with a schedule to bring them down to 9 percent by mid-2005.
  - This first reduction resulted in a decline of lending rates by 200 basis points.
- Telecommunications:
  - A new regulatory body (the Telecommunication Services Authority) has been set up, and the local telecommunication services market is being liberalized.
- Transportation:
  - Plans to restructure the Port Authority are at an advanced stage; this would entail majority private sector participation in the cargo handling operations under a new company, while rationalizing other port activities.
- Education:
  - A new university has been established and the government is increasing expenditure on education and training to raise the availability of skilled labor.

### Conclusion on competitiveness
- External competitiveness in the non-energy sector has deteriorated over the recent past and is a concern going forward during the ongoing energy boom.
- Indicators examined include the real effective exchange rate (REER), unit labor costs, and survey-based indicators.
- Findings:
  - Analysis of the REER suggests it has remained in line with its fundamentals.
  - Unit labor costs have been declining relative to the United States.
  - Nonetheless, declining non-energy exports, high capital costs, and wage pressures suggest competitiveness has been adversely affected.
- Policy implication:
  - In view of upward pressure on the real exchange rate from large energy-related inflows, determined pursuit of structural reforms, especially of the labor market, will be critical to promote employment and non-energy sector growth.

### Monetary and exchange rate policy — institutional background and framework
- Primary objective of monetary policy:
  - Achieve a low and stable rate of inflation.
  - Maintain suitable liquidity that encourages economic activity without promoting inflationary pressures.
  - A stable foreign exchange market is viewed as critical to keeping inflation low given the government is the major earner of foreign exchange.
- Financial system composition:
  - Diverse mix including trust and mortgage finance companies, merchant banks, finance houses, insurance companies, development banks, thrift institutions, mutual funds, credit unions, venture capital companies, bureaux de change, brokerage firms, specialized mortgage institution, a Deposit Insurance Corporation, the National Insurance Board, and a Stock Exchange.
  - Commercial banks are the major players with just under half of the total assets of the financial system.
  - Banking system comprised of six commercial banks, two foreign subsidiaries and four majority or fully locally-owned.
  - Finance houses and merchant banks' share in total assets has been growing.
- Foreign exchange market features:
  - Small number of major foreign exchange suppliers with earnings derived from the energy sector.
  - Central Bank is an important supplier of foreign exchange to the market, as government receives energy-related taxes and royalties in foreign currency and sells these to CBTT.
  - Six licensed traders (all commercial banks) with activity dominated by one or two major players.
  - Very little activity from bureaux de change due to relatively low tourism earnings.
- Historical exchange regime:
  - Exchange controls abolished in April 1993 and TT dollar allowed to float.
  - Under the floating regime TT dollar depreciated substantially; since 1997 the exchange rate has been de facto pegged at about TT$6.3 per U.S. dollar.
  - Special institutional arrangements in place due to lumpiness and volatility of foreign exchange inflows, including:
    - An Agreed Minute on market operations (guidelines on daily setting of buying and selling rates and a cap on spread).
    - A Code of Conduct for market participants.
    - A Sharing Arrangement to share foreign exchange purchases equally among dealers.
- Role of the Central Bank of Trinidad and Tobago (CBTT) in FX market:
  - CBTT supplies foreign exchange to the market to avoid large reserve increases that could be difficult to sterilize.
  - CBTT’s sales of foreign exchange are based on ratios, ranging from 1 to 28 percent.
  - There is a tacit agreement among market participants that the exchange rate should not move outside of a notional band.
- Monetary policy framework and instruments:
  - Framework originates in the CBTT Act (1964), amended in 1994, mandating promotion of monetary, credit and exchange rate conditions favorable to development.
  - Once the budget is approved, the CBTT estimates required open market operations (OMOs) to manage liquidity; the estimate is approved by the Minister of Finance as part of the budgetary process.
  - Two historical periods:
    - Prior to 1996: monetary policy conducted through direct instruments—mainly reserve requirements, the rediscount rate, selective credit controls, supported by moral suasion.
    - Since 1996: open market operations, mainly through outright sales of short-term government securities (largely three-month treasury bills), became the major monetary policy instrument.
  - Operational details:
    - No formalized operational framework for the execution of monetary policy, but a system of primary dealers (all commercial banks) is in place through which OMOs are transacted.
    - OMOs are conducted to influence short-term interest rates.
    - The central bank maintains daily contact with market participants to obtain information on market activity and to apprise them of existing and/or projected liquidity and other developments.

*Italic: Source: _cr0506 - 33.      Nevertheless, Trinidad (PDF chapter/section).*

### 57.      The central bank introduced a new framework in May 2002 based on the use

### D. Evolution of Monetary and Exchange Rate Policy

### New monetary framework (May 2002)
- The central bank introduced a new framework in May 2002 based on the use of its repo rate to signal the stance of monetary policy.
- When introduced, the CBTT resolved to keep excess liquidity at low levels to enhance the effectiveness of the repo rate as a policy signal.
- Over the 12-month period ending October 2002, the CBTT sold almost TT$1.7 billion interest-bearing treasury notes, which resulted in a substantial reduction in the Special Deposit Account.
- Since then, the CBTT has conducted OMOs almost daily.
- Box 1: operational details of the new framework
  - Monthly announcement: On the first Thursday of each month, the CBTT announces the level of its key policy interest rate, the repo rate—initially set at 5.75 percent in May 2002.
  - Rates tied to the repo rate:
    - Reverse repo rate: set at repo rate less 50 basis points.
    - Discount rate: set at the repo rate plus 200 basis points.
    - Special deposit rate: set at the repo rate less 200 basis points.
  - Policy band mechanics:
    - The repo and reverse repo rates define the CBTT’s trading band for the interbank money market.
    - The discount rate provides a ceiling and the special deposit rate a floor for the overnight interbank rate.

### Open market operations, liquidity management, and reserve requirements
- OMOs and short-term government securities sales influence short-term interest rates by changing banking system liquidity.
- Appropriately timed foreign exchange intervention (sales of foreign currency) also serves to reduce excess liquidity.
- Reserve requirement policy:
  - In October 2003, the CBTT announced a phased reduction in the reserve requirement for commercial banks from 18 percent to 9 percent by March 2005.
  - To offset the monetary injection from CRR reductions, special issues of government bonds will continue to be issued simultaneously to absorb the resources released.
  - Reserve requirement changes implemented:
    - Reduced from 18 percent to 14 percent in October 2003.
    - Lowered further to 11 percent in September 2004.

### Interest rate developments and transmission
- The benchmark repo rate path and related movements:
  - Repo rate introduced at 5.75 percent in May 2002.
  - Reduced to 5.25 percent in September 2002 from 5.5 percent.
  - Lowered again to 5 percent in September 2003.
- Short-term money market rates and commercial bank interest rates moved broadly in line with repo rate changes.
- Discount rate and special deposit rate settings (as tied to repo) reinforce the intraday policy range for the interbank overnight rate.

### Foreign exchange operations and exchange rate stance
- The value of the currency remained basically unchanged for several years; OMO impact is therefore mainly through short-term interest rates.
- Historical FX operations:
  - During 1993–95, CBTT’s sales in the foreign exchange market amounted to US$42 million, while CBTT purchases from commercial banks were US$150 million.
  - By end-1996, CBTT sold US$102 million to the market.
- Late-1990s to early-2000s: CBTT became more active selling foreign exchange to stabilize the exchange rate amid rising dollar demand and lumpiness of energy-sector inflows.
- Recent FX sales:
  - In 2002, CBTT sold US$309 million to the market.
  - In 2003, CBTT sold almost US$500 million to the market (compared to a small net purchase from commercial banks in 2001).

### Outcomes, indicators, and financial market development
- Credit and growth outcomes:
  - Actions (repo reductions and CRR reductions) contributed to a sharp increase in credit to the private sector of 19 percent for the 12-month period ending April 2004.
- Inflation and price stability:
  - Inflation containment: retail price increases averaged about 4½ percent over the last 10 years.
  - Core inflation (excluding volatile food prices) averaged some 1 percent a year.
- Monetary stance and transparency:
  - The expanded monetary policy framework improved transparency and transmission of signals.
  - The market appears to recognize the repo rate as the key indicator of the prevailing monetary policy stance; short-term rates are responsive to changes in it.
- Market infrastructure and policy instruments:
  - Under a new expanded auction system for government securities (introduced in July 2004), the primary dealer arrangement was expanded to include eligible nonbank financial institutions to better facilitate OMOs and encourage development of a secondary market for government securities.
  - The expanded auction system incorporated noncompetitive bids of up to TT$20,000 to encourage participation of small investors.
  - The move toward harmonization of reserve requirements across financial institutions is expected to support monetary policy objectives.

### Policy implications and institutional adjustments
- To offset liquidity effects of lower reserve requirements, the authorities will continue simultaneous issuance of government bonds to absorb released resources.
- Developmental measures to enhance monetary policy efficacy:
  - Expanded auction system and broader primary dealer participation to develop secondary market liquidity.
  - Harmonization of reserve requirements across financial institutions to support policy transmission.

*Source: IMF staff analysis and Trinidad and Tobago authorities as presented in the cited IMF report.*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr0506.pdf_